Golden Butterfly Overview
| CAGR | 8.6% |
|---|---|
| Maximum drawdown | -17.3% |
| Ulcer Index | 3.57 |
| UPI | 1.22 |
| History | 46 years (560 months) |
Golden Butterfly is a five-asset fixed allocation created by Tyler, the author of Portfolio Charts. It holds U.S. large-cap stocks, U.S. small-cap value stocks, long-term Treasuries, short-term Treasuries and gold, at 20% each, rebalanced once a year in January. There are no signals, no momentum tests and no defensive switches. It is the same portfolio in every market environment.
It takes Harry Browne's Permanent Portfolio, which splits a portfolio evenly across four economic conditions, and tilts it toward the one that pays: prosperity. Where the Permanent Portfolio holds one equity sleeve, Golden Butterfly holds two, adding small-cap value alongside broad U.S. stocks.
Dual Momentum Systems tracks it because a tactical strategy needs an honest passive yardstick, and this is one of the best-constructed ones available.
The Backstory
It started with a chart request
Portfolio Charts began with somebody on an investing message board asking for a chart. The request was for a color-coded view of a portfolio's returns across every time frame on record, a heat map rather than a single average.
Tyler, a mechanical engineer by training and a self-described visual thinker, had built exactly that kind of heat map in a college engineering course, modeling temperature across a metal plate. He built the investing version, posted it, and it landed far better than he expected. That turned into Portfolio Charts: a site of interactive tools that show what a portfolio actually did across every start date, rather than the single number a backtest usually reports.
That origin explains the site's whole character. Its signature charts are about the distribution of outcomes and about what the investor experiences: how bad the worst stretch was, how long recovery took, how much could safely be withdrawn, how much the answer depends on the year you happened to start. Those are harder questions than what the average return was, and most portfolio tools do not ask them.
Tyler has stayed anonymous throughout, which is unusual for someone whose work is this widely cited. He has no fund to sell.
The design
Golden Butterfly, published on Portfolio Charts in the mid-2010s, came out of that tooling. Browne's Permanent Portfolio covers four economic conditions with four equal sleeves: stocks for prosperity, long Treasuries for deflation, cash for recession, gold for inflation. It is famously steady and famously slow-growing, because three quarters of it is defensive at all times.
Tyler's change was to add a fifth sleeve rather than rearrange the four. Splitting the equity allocation into broad large-cap stocks and small-cap value raises the growth side to 40% of the portfolio while leaving the defensive structure intact. The small-cap value choice is not arbitrary: size and value are the two best-documented equity factors in the academic literature, and small-cap value sits where both apply.
His stated goal was the growth of a stock portfolio with the stability of the Permanent Portfolio. He has also said that when he plotted the alternatives, the Golden Butterfly landed on the efficient frontier, which is a strong claim for a portfolio anyone can build in five funds.
Why it caught on
The audience it found first was the financial independence community, and the reason is specific. That community cares less about maximizing the compounding rate than about the withdrawal rate a portfolio can sustain without running out, which depends far more on the depth and length of bad stretches than on the average return. Portfolio Charts measures exactly that, and Golden Butterfly scores well on it.
Its practical appeal is just as real. Five funds, all cheap and liquid, one rebalance a year, nothing to monitor, nothing to decide. A portfolio you can hold through a bad year is worth more than a better one you abandon, and simplicity is what makes holding possible.
Why this site carries it
Every tactical strategy here is implicitly making a claim: that reacting to market conditions beats holding a sensible fixed allocation through them. That claim needs something serious to be tested against, and 60/40 is too easy a target.
Golden Butterfly is the harder comparison. It is genuinely diversified, it holds real assets, its worst historical declines are modest, and it requires no skill or discipline beyond an annual calendar reminder. If a tactical strategy cannot beat it on a risk-adjusted basis, the tactics are not earning their complexity. It is on this site as a benchmark first and as a standalone conservative-growth option second.
How It's Built
| Sleeve | Fund | Economic condition |
|---|---|---|
| U.S. large-cap blend | VOO | Prosperity |
| U.S. small-cap value | VBR | Prosperity, with a factor tilt |
| Long-term Treasuries | TLT | Deflation |
| Short-term Treasuries | SHY | Recession |
| Gold | SGOL | Inflation |
Each sleeve is 20%. The portfolio is rebalanced every January and only in January. Between rebalances the weights drift with each sleeve's returns, which is why the allocation shown mid-year is not exactly 20% across the board. There are no drift bands and no mid-year triggers.
The fund choices follow this site's conventions for each exposure rather than the specific tickers used elsewhere. Gold is SGOL rather than GLD and the large-cap sleeve is VOO, matching every other strategy here so that comparisons are not distorted by fund selection. The exposures are the same ones Tyler specifies.
Comparing These Numbers With Portfolio Charts
If you have read Golden Butterfly's numbers on Portfolio Charts, the figures below will look worse, and the difference is measurement rather than disagreement.
Portfolio Charts reports inflation-adjusted returns, on the reasoning that what matters is purchasing power rather than dollars. This site reports nominal returns, because that is what a brokerage statement shows and what every strategy here is measured in. Over four decades that gap is large.
Portfolio Charts also measures drawdown from annual data, while the figures here are measured monthly. A monthly series catches declines that a calendar-year view never sees, so monthly drawdowns are always deeper for the same portfolio.
Neither approach is wrong. They answer different questions, and comparing a number from one to a number from the other will mislead you. For more on both, see inflation-adjusted returns and maximum drawdown.
Performance Highlights
Over the full published history, against two other fixed allocations and the index:
January 1980 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| Golden Butterfly | +8.6% | -17.3% | 3.57 | 1.22 |
| All Weather | +8.5% | -21.1% | 4.20 | 1.02 |
| 60/40 | +9.8% | -32.3% | 6.22 | 0.90 |
| S&P 500 | +12.0% | -51.0% | 12.72 | 0.61 |
Read down the drawdown column and the design shows up clearly. Golden Butterfly gives up return to both 60/40 and the index, and takes a much shallower worst decline than either. On return per unit of drawdown it beats all three, including Ray Dalio's All Weather, which is the most direct competitor in the fixed-allocation category.
Given up return is the honest cost, and this is a portfolio for someone who has decided that cost is worth paying.
The same four, measured from January 2000:
January 2000 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| Golden Butterfly | +8.0% | -17.3% | 3.62 | 1.68 |
| All Weather | +6.7% | -21.1% | 4.86 | 1.00 |
| 60/40 | +6.6% | -32.3% | 7.62 | 0.62 |
| S&P 500 | +8.1% | -51.0% | 15.89 | 0.39 |
The recent window is much kinder. Golden Butterfly roughly matches the index's return over this period while taking a fraction of its worst decline, and it beats 60/40 outright on both. A period containing two bear markets of roughly 50%, a pandemic crash, and a year when stocks and bonds fell together is exactly the environment gold and a spread of maturities were put there for.
Note also that its worst decline is the same figure in both tables, meaning the deepest drawdown of the full 46 years happened after 2000.
Two cautions apply here as everywhere. A window starting in January 2000 begins shortly before a major bear market, which flatters defensive portfolios. And a single figure covering decades says nothing about the order the returns arrived in, which is most of what an investor lives through.
Portfolio Characteristics
- Fixed and passive. The same five sleeves at the same weights forever. No signals, no regime detection, no defensive switches.
- Economically diversified. Each sleeve is there for a different economic condition rather than for a different slice of the same equity market.
- Two growth engines. 40% in equities, split between broad large-cap and the size and value factors.
- One rebalance a year. January only, with drift in between. As little maintenance as a five-fund portfolio can require.
- Always fully invested. No cash position beyond the short-Treasury sleeve, which means the portfolio never sits out a decline.
- Shallow drawdowns for an equity-holding portfolio. The defensive structure is the whole point, and the record reflects it.
- 20% in gold. A large allocation by conventional standards, and the source of much of the portfolio's behavior. Gold can do nothing for years at a time.
- Tax-friendly. One rebalance a year and no turnover otherwise make this one of the few strategies here that is reasonable in a taxable account.
- No leverage. Golden Butterfly never holds a leveraged fund.
- Scalable. All five positions are large, liquid exchange-traded funds.
Who It's For
Golden Butterfly is designed for investors who want:
- A serious fixed allocation rather than a tactical strategy, with nothing to monitor between Januaries.
- Diversification across economic conditions rather than across slices of the same equity market.
- Shallow drawdowns and short recovery times, which matter most for money being drawn on.
- A portfolio that works in a taxable account.
- A benchmark for judging whether any tactical strategy, here or elsewhere, is earning its complexity.
It is a poor fit for investors seeking maximum long-run growth, those uncomfortable holding 20% in gold, or those who would be frustrated watching the S&P 500 run away from them during a strong equity bull market. Investors who like the economic-conditions framing but want a defensive overlay should compare it with Permanent Portfolio DMS. Those who want its steadiness from a tactical design should look at Triad and Quiet Compounding.
The Golden Butterfly was created by Tyler of Portfolio Charts and is presented here as an independent implementation, with the fund substitutions described above. Dual Momentum Systems is not affiliated with or endorsed by Portfolio Charts. The original is documented at Portfolio Charts.
Past performance, including backtested results, is not indicative of future results. Backtested performance is hypothetical, does not reflect actual trading, and benefits from hindsight in the selection of strategy rules. Portions of the long-term history rely on reconstructed proxy data for funds that did not exist for the full period. Investors should carefully consider their risk tolerance and consult with a financial advisor.
For the latest details, visit www.DualMomentumSystems.com